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China supports Cross-border eCommerce with new laws

China supports Cross-border eCommerce with new laws

On November 21st,2018, Chinese state council has announced a serial of policy changes on retail imports and exports that will significantly support Cross-border eCommerce trade to China.

One big change will be related the regulations for both single and annual cross-border eCommerce purchase limits. The limits are raised from 2,000 RMB to 5,000 RMB (640€) per order and from 20,000 RMB to 26,000 RMB (3300€) per year. Up to these limits, the Chinese consumers purchasing products with cross-border eCommerce model will pay reduced tax of 11.2 %. The same limits also apply to goods stocked in a bonded warehouse in Chinese free trade zones.

Besides, more than 63 new items are added to the cross-border eCommerce “eligible list”. The products in the list do not require China import license to sell goods on cross-border eCommerce model. This addition allows larger selection of goods to be sold on cross-border eCommerce model and will encourage new foreign merchants to enter the Chinese market.

 

What is a Daigou?

Another significant change starting from 1 January 2019, is the central government’s straight out zero-tolerance for Daigou business.

A daigou is not personal or company entity, instead, made up with thousands of shopping agents who seek out products overseas for buyers in China. The goods are often hand-carried into country without payment of taxes and duties. The shopping agents receive certain amounts of commission fees on the purchase in exchange. Often the final trade taken place through different consumer-to-consumer (C2C) platforms like Taobao and WeChat.

The aim of the new laws is to more strictly regulate China’s rapidly growing eCommerce market sector, facilitate prosper and harmony, and eradicate IP infringements, scams and unfair competition. In practice for Daidou, this will mean that they need to start reporting the overseas purchases to authorities and pay the related taxes and duties.

But why is Daigou enforced to crackdown? The biggest reason is that they are constantly acoiding taxes or tariffs. Although Daigou as the third largest business model in China, it is illegal without any product guarantee or relevant licenses.

 

What will change?

As the new law will significantly reduce product offering through Daigou business, it will drive more Chinese consumers to be users of different cross-border eCommerce platforms. Same time the new law will allow Chinese consumers to purchase more products from overseas with lowered duties, further increasing attractiveness of cross-border purchases.

The eventual winners through this new law will be the cross-border eCommerce merchants who sell their goods to Chinese consumers through Tmall Global, JD.com, WeChat, Kaola, and other cross-border eCommerce platforms in China.

Need more information regarding eCommerce business in China and about unlocking the world’s largest eCommerce market? Please do not hesitate to contact us at Flying Lynx, our China experts are sincerely welcoming to hear from you.

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